1.

Initial Franchise Fee. If you sign a Development Agreement to open multiple Restaurants, you must pay an initial franchise fee of $45,000 for the first SPICY PICKLE Restaurant plus a $10,000 development fee for each additional Restaurant to be developed.  We apply the nonrefundable $10,000 development fee paid for the second and each subsequent Restaurant to be developed toward the initial franchise fee for each Restaurant, the remainder of which is paid at a later date.  The initial franchise fee is discounted to $20,000 for the second and each subsequent Restaurant that is developed under the Development Agreement.  See Item 5.

2.

Site Development Fees. Depending on the availability of construction or “as built” drawings, it may be necessary for us to require you to obtain an on-site investigation report of the condition of the premises, which could cost an additional $2,500.  If a permit expediter is used to obtain permits, your additional costs not included in the chart could be as high as $10,000.  A breakdown of these estimated costs follows:

3.

Equipment.  This item includes the estimated costs to obtain, ship and install the large equipment, bakery equipment, furniture (including tables and chairs, and patio furniture), millwork and concrete counters, booths if applicable, custom display materials, smallwares, music and TV systems, safe and other office equipment  including computers and related POS System equipment and software fees for set up of the gift, frequency and reporting modules. This item includes the estimated costs to purchase and license a computerized point-of-sale system and software with two terminals and training.  None of these payments are refundable once paid.  Your costs may be higher if you decide to add more terminals.  We reserve the right, in the Franchise Agreement, to license to you our own proprietary software if we choose to develop proprietary software and make it available to you.  We reserve the right to charge you for obtaining the software in an amount that will not exceed the high range estimate in the chart above, when added to your other costs incurred for items in this category.  See Items 8 and 11 for other information about the required POS System and computer hardware and software for your Restaurant.  The estimates assume new equipment. Although used equipment is generally available at lower costs it usually carries no warranty and can in the long run be more costly than new equipment.  We do not require that you purchase or lease a vehicle, as you may use any existing vehicle that you own or employees’ vehicles to make deliveries.  A breakdown of these estimated costs follows:

4.

Leasehold Improvements. Typically, a SPICY PICKLE Restaurant will be approximately 2,000 square feet of retail space and seat approximately 30 to 50 customers inside.  Ideally, limited patio seating is also available.  Your costs for tenant finish for the Restaurant will depend in large part on the square footage of your Restaurant, whether your space must be completely constructed or is the remodel of an existing space, the location and overall costs in the market in which you are developing the Restaurant.  The estimate in the above chart reflects the build-out of empty space in vanilla shell condition based on a Restaurant of 2,000 square feet.  The square foot cost is assumed to be $85 a square foot plus profit and overhead, although your actual costs may vary under or over the estimates.  We also assume that you obtain a tenant improvement allowance from the landlord of $20 to $30 a square foot.  A tenant improvement allowance in this range is generally available on new construction unless the landlord is going to install all of the permanent improvements such as HVAC, electrical panels, bathrooms and fire code systems.  If the build-out is a remodel of an existing space and already installed improvements may be re-used, your costs may be lower than the costs estimated in the chart.  The leasehold improvements that are typically made, including site work, include: demolition where necessary, concrete, masonry, structural steel, rough carpentry, roofing, doors and frames, drywall, flooring, painting, mechanical and plumbing and electrical.  If the jurisdiction requires grease traps and/or hoods, additional costs may be incurred unless the landlord installs it as a common amenity and amortizes the cost in the common area maintenance charge of the lease.  We provide you with standardized blueprints for a Restaurant to suit the shape and dimensions of the Franchised Location. This estimate also includes the counter areas for order-taking and food preparation.  If you purchase property or a building, or both, for the Restaurant, your additional costs will depend on the location and size of the land and building.  We do not typically invest in the land and building for a SPICY PICKLE Restaurant.  We are unable to estimate these costs due to the significant variances based on location and market conditions.

5.

POP, Menus and Uniforms.  This includes the cost of printed materials, including printing menus with the address of the Franchised Location, other point of purchase (“POP”) materials, uniforms and clothing for the staff, in store décor and catering and packaging materials. You also may purchase a Spicy Pickle Mascot suit for an additional cost of approximately $790 (optional).

6.

Food and Beverages, Paper. You must open with and maintain an adequate inventory of menu items, ingredients and paper goods to serve your customers. 

7.

Training Costs and Salaries Preopening.  You will incur expenses for retaining and training employees prior to the opening of your Restaurant.  Your travel and living expenses when you attend our initial training program in Colorado vary depending on the length of your instruction, the distance you must travel and the standard of living you desire while you attend the program.  The estimate covers expenses for two people attending our four-week training session in Colorado and certain other preopening training costs.  See Items 6 and 11.

8.

Security Deposits, Business Licenses and Legal Fees (“Soft Costs”). Security deposits, if applicable to your Restaurant, are usually one month’s rent; and business licenses range from approximately $100 to $1,000, depending on your location.  If you retain an attorney, the legal fee estimate includes entity set-up, lease review, employment matters and advice regarding licenses and permits.  

9.

Additional Funds. This item estimates your pre-operational expenses, which we have not listed above, as well as additional funds necessary for the first three months of your business operations.  These figures are estimates and we cannot guarantee that you will not have additional expenses starting the business.  Your costs depend on factors such as: how much you follow our methods and procedures; your management skill, experience and business acumen; local economic conditions; the local market for our products and services; the prevailing wage rate; competition; and the sales level reached during this initial period.  This item includes a variety of expenses and working capital items during your start-up phase such as:  rent; debt service; accounting fees; office equipment (not detailed above, such as facsimile machine and photocopier); insurance premiums; advertising and promotional expenses and materials; employee salaries; and other miscellaneous costs.  This item also includes your reimbursements to us of our out-of-pocket costs and expenses, for the build-out of your Restaurant.  However, this item excludes your salary.  If you choose to provide delivery and catering services, the chart does not include the cost of a delivery vehicle.  You are not required to provide a delivery vehicle (you may rely on your currently owned vehicle or employee-owned vehicles).  If you acquire your own vehicles, costs will vary depending upon the type of vehicle and whether it is owned or leased.
During the initial period of the operation of your Restaurant, it is our experience that it will be challenging to both oversee and operate the Restaurant as well as market and promote the Restaurant in your market area.  To address the importance of marketing your Restaurant during this initial period, we have included in Additional Funds approximately $20,000 that we recommend be spent on marketing, promotions, sponsorships and other marketing programs to promote your Restaurant and the SPICY PICKLE brand in the marketing area where your Restaurant is located.

10.

11.

12.